SCN u/s 73 for GTO Services Not Maintainable where Assessee Covered u/s 71A of Finance Act: CESTAT [Read Order]

The Customs, Excise and Service Tax Appellate Tribunal (CESTAT), Chennai Bench, held that a show cause notice (SCN) issued under section 73 of the Finance Act, 1994 for Goods Transport Operator (GTO) services is not maintainable as the appellant is covered under Section 71A and the proceedings were initiated under an incorrect statutory mechanism without issuance of a fresh SCN under the amended provisions.

The appellant, Sri Lakshmi Saraswati Textiles (Arni) Ltd, is manufacturer of cotton yarn and has availed transportation services through Goods Transport Operators during the period 16.11.1997 to 01.06.1998.

A show cause notice dated 22.03.2002 was issued to appellant demanding service tax along with interest and penalties under sections 76 and 77 for non-payment of service tax and non-filing of returns.

Aggrieved by the decision of the Adjudicating Authority, the appellant filed a complaint to the Commissioner (Appeals). The commissioner upheld the demand.

N. Isewarya, the counsel for the appellant, contended that the proceedings initiated under Section 73 are not sustainable as the appellant was covered under the special provisions of Section 71A and not under Section 70.

It was contended by the appellant counsel that the show cause notice issued under Section 73 is without jurisdiction and therefore not maintainable

G. Krupa, counsel for the respondent, relied upon the findings of the lower authorities and contend that the levy of service tax is valid.

Ajayan T V, Judicial Member and Ajit Kumar, Technical Member noted that subsequent statutory amendments introduced a separate mechanism under Section 71A requiring service recipients to file returns within the prescribed extended period.

The Tribunal relied upon the decision of the Supreme Court in case of L.H. Sugar Factories Ltd. held that the proceedings initiated under Section 73 against the appellant are not sustainable in law as section 73 applies to failure to file returns under Section 70, and cannot be invoked against persons covered under Section 71A.

The Tribunal further held that the show cause notice issued prior to the amendment cannot be sustained in the absence of fresh proceedings in accordance with law.

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